KeyCorp reported net income of $212 million, or 22 cents per share, on revenue of $1.04 billion in the July-September period.

Bad loans declined by $584 million to $788 million.

Analysts had forecast earnings per share of 21 cents on revenue of $1.01 billion, according to FactSet.

In last year's third quarter, the company earned net income of $178 million, or 20 cents per share, on revenue of $1.13 billion.

Chairman and CEO Beth Mooney said the report reflected continued momentum as KeyCorp works to reduce bad loans and control costs.

Mooney said in a statement that KeyCorp was working to expand its loans to small- and midsized businesses and has committed $5 billion to the effort over the next three years.

"As we look forward, we start seeing average loans starting to grow. That's huge for us," Mooney said in a phone interview. "That says our business plan is working for growing our franchise again."

However, she said the uncertain economy was a concern and might hurt prospects.

"If there is a sustained erosion of confidence and/or a slowdown in business activity, that will obviously put pressure on the ability to show growth," she said. "It doesn't mean you don't continue to call on your clients, but it may not translate into growth."

Nonperforming assets declined by $887 million from the year-ago quarter to $914 million.

Net charge-offs declined to $109 million, or 0.90 percent of average loan balances, in the quarter. That compared to $357 million, or 2.69 percent of average loan balances, for the third quarter of 2010.

For the nine-month period, KeyCorp posted net income of $619 million, or 67 cents per share, on revenue of $3.12 billion, compared with nine-month 2010 net income of $111 million, or 13 cents per share, on revenue of $3.33 billion.

KeyCorp shares rose 25 cents, or 3.8 percent, at $6.62 in midday trading Thursday, near the lower end of its 52-week range of $5.59 to $9.77.

Cleveland-based KeyCorp has more than 1,000 branches in 14 states stretching from Alaska to Maine.